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The Brickwork credit rating process details the various steps and activities involved in assigning a credit rating, starting from the signing of the rating agreement, to the assignment of the rating and subsequent actions such as rating dissemination and surveillance. Policies and methodologies govern each step of this process. We have step-by-step guidelines for rating analysts to conduct rating assignments and that formalizes the rating process. Each step in the process is subject to a strict timeline.
At Brickwork Ratings, we have well-defined and updated criteria, which are publicly available and consistently applied. The rating committees have the sole authority to assign ratings. All rating actions are announced promptly and a list of all outstanding ratings are freely available on the Brickwork Rating Web site. Every rating assigned is kept under surveillance until it is withdrawn.
The Business development group is responsible for obtaining mandates from prospective entities, and this group will handle all business communication and finalize the commercial terms of the rating assignment. The Analytical group handles all analytical responsibilities for a rating assignment and for assessing credit risk for the relevant entity. They are not involved in any commercial discussions with the entity. The Analytical group will be responsible for the rating process from receipt of written consent for a rating until the time the rating is made public. They are responsible for surveillance and review of ratings. The Criteria group is responsible for formulating, maintaining, and refining the criteria framework under which the various types of issuance will be rated. This group ensures, before implementation, that any new criteria proposed are thoroughly discussed from both an analytical and market impact perspective. These functional groups, although separate, are collectively responsible for the successful implementation of the rating process. They will help to build up a substantial base of information on its ratings, present a transparent approach to the financial markets.
At Brickwork, we believe in following international best practices without compromising innovation and analytical excellence. Brickwork Ratings Process is broadly classified into: a) Pre-Rating b) Rating and c) Post-Rating processes. The objective for inclusion of Pre-rating and Post-rating processes in this document is done with the purpose of having a comprehensive understanding on the subject.
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a) Pre-Ratings
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| 1. |
Brickwork Ratings process begins with a credit rating request from the issuer or its representative. When unsolicited ratings are issued, the same is covered by Unsolicited Ratings Policy. |
| 2. |
At Brickwork, we have adopted a policy not to promise, assure or guarantee – either implicitly or explicitly a particular rating outcome to the client. |
| 3. |
At Brickwork, we have adopted a practice to explain the entity the scope and use of the ratings, as well as the broad assessment followed. This part is normally carried out through presentations, brouchers and other materials as disclosed in the website to minimize misrepresentation. The policies related to the use of ratings, conditions for withdrawal, and possible circumstances for rating actions are clearly communicated. |
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The issuer signs the detailed rating agreement and provides initial information as well as rating fees. |
| 5. |
Confidentiality of information is of paramount importance for us in Brickwork, and relevant measures and processes are put in place in the organizational structure to maintain confidentiality of such information at all points in time. All employees who may have access to such confidential information must, without exception, acknowledge compliance with the code of confidentiality in writing. Such an affirmation by way of self-certification are obtained from the employees on a periodic basis as a legally binding undertaking, and enforced even after termination of employment or association with Brickwork. |
b) Ratings
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| 6. |
At Brickwork, credit rating criteria enable analysts to analyze and interpret information appropriately. We refine criteria and benchmarks proactively, taking into account changes in the market environment. Robust criteria assist in accurate assessment of credit risk for an entity. Ratings are subjective credit opinions based on various qualitative and quantitative factors. The robustness of ratings is preserved through consistent application of updated rating criteria. Besides developing criteria for in-house use, we publish a broad criteria framework in our website. Consistent application of criteria helps us to compare ratings. |
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Brickwork’s rating process ordinarily takes 2-3 weeks. The rating mandate, structure of the instrument as well any information received is forwarded to the rating team of analysts. Brickwork is however, able to put on additional resources and compress the time frame provided the external rating committee could meet in shorter time. |
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The Analyst team studies the information given by the client and does cross validation from both the public and private sources. Brickwork provides their analysts access to certain public & private databases that have information of millions of companies. |
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Brickwork analysts also study the general information on the economy as well as industry both from the international and domestic perspective. For instance the effect of global financial crisis, erratic foreign exchange market could be relevant for the Export Import companies. |
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The team of analysts have meeting with the management. The team typically discusses the management views on their competitive strategy, marketing plans, financial projections; both short term & long term outlook, corporate governance policy as well as hedging policies, etc… |
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The Internal Rating Committee looks at the information presented by the analysts, and arrives at the reasonable rating for the instrument/issuer. The Internal rating committee normally witnesses brain storming session among the team members and arrive at their final recommendations. |
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The Brickwork’s External Committee consists of external experts, selected Board of Directors including the former chairman of a bank as the Chairman of the Committee and Academic experts. The external committee takes the final rating decision, including outlook. |
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On completion of the External Committee meeting, the decision is communicated to an issuer. The detailed printout of rationale is also sent to the issuer. Brickwork analysts answer any queries the issuer may have in terms of process and structure used in the rationale. |
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In the event that the issuer disagrees with the initial rating, and has additional information that it believes can make a material difference to its rating, it is highly desirable that the issuer have recourse to an appeal process. Upon receiving valid information, the rating committee will discuss the merits of the case and may or may not decide to modify the rating. The rating committee may decide to include one additional member who did not participate in the original rating to bring in a fresh perspective. |
c) Post-Ratings
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If the rating is accepted a suitable press release along with a rationale is release to the public domain. |
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Brickwork assigns, the press release to all major financial and other news papers using a private wire network. The detailed rationale is also released along with the press release. Both these documents are simultaneously uploaded on Brickwork’s website for any investors to read and view the rating. |
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Most issuer and long term issue ratings are typically valid for a year with certain exceptions like IPO grading, short term ratings, recovery ratings etc. Brickwork team monitors Companies on quarterly basis to update quarterly financial releases. In addition, the analysts speak to management once a year to update on any issue performance. The issuer has also obligations to inform Brickwork regarding any positive or adverse events. Brickwork analysts also directly monitor the companies via Internet alerts. |
| 18. |
The circumstances under which a rating could be withdrawn are covered under the ‘Ratings Withdrawal Policy’. |
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